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Politics and Economy:
Vested Interest
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Wall Street Email Trail Overview

Last week Merrill Lynch announced it would pay $100 million in fines and change the way its analysts do business. The announcement was the result of a settlement between New York Attorney General Elliott Spitzer and the Wall Street giant.

According to the Attorney General's office:

The agreement with Merrill Lynch comes after allegations that the company's investment advice was tainted by conflicts of interest. A core issue was whether or not analysts were being truthful and fair in their public pronouncements on stocks of companies for which Merrill Lynch did investment banking business.

Much of the evidence in the case came from company e-mails. Below is a chart showing what Merrill's analysts were saying about certain stocks in public, and in private. Selected complete e-mails follow. Rating 1, "buy," is the highest Merrill's analysts award; rating 2, "accumulate," is the second highest rating given to any stock. (Henry Blodget was a Merrill Lynch analyst.)

For more information on the lawsuit see the New York Attorney General's supporting documentation.


Excite @ Home (ATHM) 6/3/00: Merrill Lynch published rating: 2 (accumulate) -1 (buy)

7/20/00: "We do not see much more downside to the shares." Research report

Short-term rating: Accumulate

6/3/00: "ATHM is such a piece of crap!" -Henry Blodget E-mail
Lifeminders (LFMN) 12/4/00: Merrill Lynch published rating: 2 (accumulate) - 1 (buy)

12/21/00: "We think LFMN presents an attractive investment." Research report

12/4/00: "I can't believe what a POS [piece of sh-t] that thing is." Merrill Analyst Henry Blodget e-mail. 12/19/99: Analyst Henry Blodget suggests 3 (neutral) -2 (accumulate) rating 12/19/99: Analyst Henry Blodget calls stock a "dog"
Internet Capital Group 10/5/00: Merrill Lynch's published rating: 2 (accumulate) - 1 (buy)

Placed on Merrill Lynch's list of the top ten technology stocks ("Top Ten Tech" list), as late as September 12, 2000

10/5/00: "Going to 5" (closed at $12.38)

10/06/00: "No helpful news to relate [regarding ICGE], I'm afraid. This has been a disaster·there really is no floor to the stock." 7/11/00: Report says, "InfoSpace continues to be one of the best ways to play the wireless Internet."

Rating: 1 (buy) - 1 (buy), the highest possible rating

InfoSpace was on the "Favored 15" List from at least August 2000 until December 5, 2000.

Was a major investment banking client.

7/13/00: Analyst Henry Blodget had acknowledged as early as June 2000 that the stock was a "powder keg" and that "many institutions" had raised "bad smell comments" about it and in October had referred to it as a "piece of junk."

5/17/00: "This company [InfoSpace] is very important to us from a banking perspective, in addition to our institutional franchise·" 1/11/01: "We believe GoTo will be a survivor." Research report 1/4/01: "I don't think it deserved a 3-1 [short-term neutral, long-term buy rating]." - Analyst Kirsten Campbell

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